At the beginning of the year, Custom Mfg. established its predetermined overhead rate by using the following cost predictions: overhead costs, $750,000, and direct materials costs, $625,000. At year-end, the company’s records show that actual overhead costs for the year are $830,000. Actual direct materials cost had been assigned to jobs as follows. Jobs completed and sold $513,750 Jobs in finished goods inventory 102,750 Jobs in work in process inventory 68,500 Total actual direct materials cost $685,000 1. Determine the predetermined overhead rate using predicted direct materials costs. 2. Set up a T-account for Factory Overhead and enter the overhead costs incurred and the amounts applied to jobs during the year using the predetermined overhead rate. 3. Determine whether overhead is overapplied or underapplied (and the amount) during the year. 4. Prepare the adjusting entry to allocate any over- or underapplied overhead to Cost of Goods Sold.
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
At the beginning of the year, Custom Mfg. established its predetermined
cost predictions: overhead costs, $750,000, and direct materials costs, $625,000. At year-end, the
company’s records show that actual overhead costs for the year are $830,000. Actual direct materials cost
had been assigned to jobs as follows.
Jobs completed and sold $513,750
Jobs in finished goods inventory 102,750
Jobs in work in process inventory 68,500
Total actual direct materials cost $685,000
1. Determine the predetermined overhead rate using predicted direct materials costs.
2. Set up a T-account for Factory Overhead and enter the overhead costs incurred and the amounts
applied to jobs during the year using the predetermined overhead rate.
3. Determine whether overhead is overapplied or underapplied (and the amount) during the year.
4. Prepare the
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